Watching the west: WA’s microgrid inquiry

Western Australia’s future energy system, like many others around the world, is expected to look very different in the future.  As is now widely recognised, there is a move away from traditional centralised generation toward distributed and service based energy solutions.  Initially this was evidenced by way of widespread installation of rooftop solar, and is increasingly seen in service models making use of Distributed Energy Resources (DER) such as batteries, and trading or aggregation platforms. 

This transformation is being driven not just by energy policy, but by broader trends in technology and digitisation, as well as consumer desire for security and lower costs of living.  (It is also worth noting that some consumer benefits received by the energy transformation are due to the transfer of costs from one party to others.)

However this transformation is not only technical, the legislative and regulatory frameworks built for the traditional centralised model also need to adapt with the change. As articulated by cultural anthropologist Gretchen Bakke, “the grid is built as much from legal frameworks as from steel, it runs as much on investment strategies as on coal, it produces profits as much as free electrons”[i].

WA reform

Western Australian microgrid reform is worth a watching eye. Deloitte’s 2017 Innovation in Electricity Networks report recognised the state’s two network operators (Western Power and Horizon Power) as leaders in electricity network innovation.

The WA Economics and Industry Standing Committee was formed to investigate and report on the emergence and impact of electricity microgrids and associated technologies, in both metropolitan and regional WA.

The committee[ii], chaired by Jessica Shaw MLA, commenced on 21 February 2018 and it is due to table its findings by 28 March 2019. Its assessment is expected to report on the potential for microgrids (and associated technologies) to contribute to the provision of affordable, secure, reliable and sustainable energy supply. It will also assess potential opportunities to maximise economic and employment opportunities associated with the development of microgrids, as well as key enablers, barriers, and other factors affecting microgrid development and electricity network operations.

In addition to the three government owned trading entities, there are over 30 private sector retail, generation and network business licensed to provide energy services in Western Australia[iii].  The committee received 47 written responses from representatives from a broad array of stakeholders including state and local government, market regulators and operators, unions and consultants.

The inquiry responses have defined microgrids in a number of ways, however Western Power’s definition below is recognised as a reasonable definition of a microgrid.

Table 1: Western Power definition of a microgrid

Source: Western Power Submission, 2018

The South West Interconnected System (SWIS) developed into a substantially sized network designed to transport electricity generated in a few locations to a dispersed population.  Today, this model does not necessarily provide the most reliable and cheapest electricity service for all customers. In some circumstances, decentralised solutions can help lower costs, and improve system reliability with a lower carbon footprint.

Unsurprisingly, inquiry responses were in broad agreement that the objectives of supporting the growth of microgrids should be to improve customer outcomes and reduce whole of system costs. The key themes noted in the submissions include:

• Microgrids are accepted to form a part of the future electricity system
• The provision of microgrid services and solutions should be open to competition, and lowering of the contestable threshold will support retailer innovation
• Regulatory flexibility will be required to design suitable solutions that benefit customers and the whole of system, including consideration of hybrid electric-gas solutions
• Advanced Metering Infrastructure, and inverter standards will be necessary to facilitate benefits from microgrid solutions
• Tariff reform will support achieving potential microgrid benefits
• Visibility and integrated control of microgrids will be critical to achieve benefits and maintain system stability
• Policy integrating transport electrification with microgrid regulatory and policy development could deliver significant benefits

Given the pace of change, regulatory flexibility will be vital in setting a future policy and regulatory framework for microgrids - and there are important policy considerations, such as the potential for reducing the number of customers paying for the network, thereby increasing the burden of network cost on those still using the network, as well as the potential to manifest inefficient deployment and use of centralised generation capacity.

There is also a need for transparency in cost-benefit analysis in determining whole of system benefits, as well as a need for managing power at a distribution level to respond to needs for demand management (frequency and voltage control etc.) and more efficient infrastructure investment.

Conclusion

The Australian Energy Council echoed members’ views in our response to the inquiry stating that the market should be allowed to design cost effective solutions for any non-monopoly assets.  In order to design innovative solutions (for example, some solutions already trialled in WA utilise hybrid technologies featuring natural gas, hydrogen, solar, and storage) regulatory barriers need to be removed to allow solutions to benefit both the retailer and customer. 

Reform should eventually open up contestability to all electric customers, perhaps with a staged reduction of the contestable threshold currently set at 50 MWh per year.  This could be further supported with a contestable metering framework. It is recognised that suitable infrastructure such as advanced meters will be required to facilitate effective achievement of microgrid benefits. 

Further flexibility could be provided by allowing aggregation of multiple customers to greater than 50 MWh per year, thereby allowing a greater array of potential supply solutions; as well as aggregating generation via Virtual Power Plants (VPP).

Also, given that retailers are already obliged to maintain customer protections, they are perhaps best placed to facilitate deployment of microgrid solutions to consumers. 

Appropriate tariff reform combined with suitable electric vehicle incentives has also been identified as a potential mechanism for shaping the load profile in the Wholesale Electricity Market. This also needs to be supported by appropriate network infrastructure, system control and regulatory settings.

[i] Horizon Power Submission

[ii] The Legislative Assembly committee includes Ms Jessica Jane Shaw MLA (Chair), Mr Sean Kimberley L'Estrange MLA, Mr Yaz Mubarakai MLA, Mr Stephen James Price MLA, Hon. Donald Terrence (Terry) Redman MLA

[iii] Alinta Energy Submission